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Could McGrath RentCorp's (NASDAQ:MGRC) Investor Composition Influence The Stock Price?

Simply Wall St

Every investor in McGrath RentCorp (NASDAQ:MGRC) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$1.5b, McGrath RentCorp is a decent size, so it is probably on the radar of institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about MGRC.

See our latest analysis for McGrath RentCorp

NasdaqGS:MGRC Ownership Summary, July 22nd 2019

What Does The Institutional Ownership Tell Us About McGrath RentCorp?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors own 87% of McGrath RentCorp. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see McGrath RentCorp's historic earnings and revenue, below, but keep in mind there's always more to the story.

NasdaqGS:MGRC Income Statement, July 22nd 2019

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. McGrath RentCorp is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of McGrath RentCorp

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that McGrath RentCorp insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$14m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public holds a 13% stake in MGRC. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand McGrath RentCorp better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.